Both relief and anticipation could be observed among foreign investors after the Justice and Development Party's (AK Party) landslide victory in last Sunday's elections.
The investment mood in Turkey was very positive on Monday as well -- the İstanbul Stock Exchange benchmark index (İMKB-100) increased by 5.6 percent over the day, ultimately reaching 55,913 points. The Turkish lira and government bonds also welcomed the results as the lira strengthened against the US dollar for a six-year high of YTL 1.2426 to $1.
Interpretations of these events indicated an optimistic evaluation of Turkey's political scene. "The situation for Turkish stocks look best," concluded experts at US investment bank JP Morgan. "The electoral success of the AK Party is not only helping Turkish shares but also betters perspectives for Turkish governmental loans," added Thomas Amend, an HSBC Trinkaus & Burkhardt analyst. He explained that current two-year bond yields have reached 17.21 percent, the lowest level in about a year.
Further stabilization needed
Though minimal, skepticism does remain at this early stage. "Political stability together with the generally positive economic fundamentals should allow the central bank to decrease the prime interest rate in the second half of the year," Amend said. In any case he is predicting developments in the Turkish markets in the near future. Still, risks remain, according to some analysts writing for the German economy paper Handelsblatt. "If the AK Party really tries to change the Constitution, conflicts are to be expected," stated Charles Robertson, an Emerging Europe expert at ING. Wolfang Piccoli from the Eurasia Group political risk consultancy agency explains why the new distribution in Parliament is a good move: "Due to the fact that the AK Party didn't reach a two-thirds majority, there is no chance for them to change the Constitution alone. This is the best that could have happened. … This is a solid majority for the AK Party but not strong enough to allow for experimentation."